Stock Markets Cheer Congressional Action, But The Tough Issues Are Still Ahead

The last minute deal cobbled together in Washington to temporarily prevent the U.S. from going over the fiscal cliff was met with jubilation on stock markets around the world with many markets up two percent or more.CliffCut

But once the partying is over, investors are likely to look ahead and focus on other fiscal cliffs that may be far more difficult for Congress to deal with.

Two huge issues loom just ahead:

How to cut the mandated $110 billion in spending this year and raising the $16.4 trillion federal borrowing limit. Both could be more difficult for the Republicans and Democrats to compromise on.

That doesn’t even include reforming Medicare and Social Security, the two biggest entitlement programs.

“I think we kind of went over the cliff, had a parachute that put us right back on the cliff, but battles ahead for sure,” former Clinton administration adviser Thomas “Mack” McClarty told CNBC’s “Squawk Box” on Wednesday. “I don’t think there’s any victory laps here.”

   “Nothing really has been fixed,” Joseph LaVorgna, an economist at Deutsche Bank, told AP. “There are much bigger philosophical issues that we aren’t even addressing yet.”

Similar Posts: